Economy meets Brown's target

THE ECONOMY accelerated over the last three months, confounding the doomsayers who predicted that the UK would plunge into recession

It is the first time Britain has avoided a boom-bust cycle in post- war history and hopes of another cut in interest rates were banished yesterday after it emerged that the recovery is stronger then previously thought. Total output grew by 0.5 per cent over the three months to June and 1.2 per cent on the year, ahead of City forecasts of 0.4 per cent and 0.8 per cent. The economy has now avoided a fall in output in any of the last 28 quarters - the longest period since records began in 1955.

The Government seized on the figures, saying it justified its forecasts for 1999 of growth between 1 and 1.5 per cent.

The Treasury's estimate was much derided at the time by private sector economists in the City, who pencilled in sluggish growth of 0.9 per cent.

"These preliminary growth figures are encouraging and in line with the Budget forecast. They show the UK has been steering a course of stability," a Treasury spokesman said.

Assuming there are no shocks in the pipeline, this will be the first business cycle to have achieved a "soft landing" - strong growth declining back to zero without crashing into recession. On Thursday, the Office for National Statistics (ONS) revised the first quarter of the year up from zero growth to 0.1 per cent but revised down the last quarter of 1998 to zero.

Yesterday the City joined in the chorus of approval for the Chancellor and for the independent Monetary Policy Committee that sets rates. "The gloom-mongers have had the rug pulled from underneath them," said Neil Parker of the Royal Bank of Scotland.

John O'Sullivan of Greenwich NatWest said: "It looks like it is going to be bang in the middle of his forecast. Gordon Brown is looking like a forecasting guru."

But economists said the fact the economy troughed six months ago and is now accelerating meant there was little spare capacity. Adam Cole of HSBC said: "With growth running broadly in line with its long term trend, there is no case for lower rates from here."

Stephen Lewis of Monument Derivatives said the MPC would face a dilemma in dealing with current falling inflation and a "significant risk" that it would rise above target on a two-year view. "The MPC can probably do no better thanstand pat on rates until the confusion clears," he said.

Early estimates from the ONS pointed to a broadly based improvement, with both production and services growing.

It said the service sector, despite falls in both business and financial services, grew 0.5 per cent on the back of strong transport sector growth. On the production side there were small rises across the board. Britain's economy has expanded 21 per cent since the last recession ended in mid- 1992, with services output up 27.5 per cent and industrial production up 12.8 per cent, including 9.3 per cent growth in manufacturing.

Meanwhile, house price inflation eased slightly this month, with the annual rate falling to 6.9 per cent from 7.5 per cent in June, the Nationwide building society said. Earlier this week it revised up its forecast for 1999 growth to 8 per cent, almost double its previous 4.5 per cent forecast.

Outlook, page 21

Sport
Radamel Falcao
footballManchester United agree loan deal for Monaco striker Falcao
Voices
A man shoots at targets depicting a portrait of Russian President Vladimir Putin, in a shooting range in the center of the western Ukrainian city of Lviv
voicesIt's cowardice to pretend this is anything other than an invasion
Arts and Entertainment
The eyes have it: Kate Bush
music
Sport
Louis van Gaal, Radamel Falcao, Arturo Vidal, Mats Hummels and Javier Hernandez
footballFalcao, Hernandez, Welbeck and every deal live as it happens
PROMOTED VIDEO
Arts and Entertainment
booksNovelist takes aim at Orwell's rules for writing plain English
Arts and Entertainment
Al Pacino in ‘The Humbling’, as an ageing actor
filmHam among the brilliance as actor premieres two films at festival
News
Fifi Trixibelle Geldof with her mother, Paula Yates, in 1985
people
Arts and Entertainment
Downton Abbey fans rejoice, series five returns later this month
TV
Arts and Entertainment
booksExclusive extract from Howard Jacobson’s acclaimed new novel
News
i100
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Application Support Analyst / Junior SQL Server DBA

£40000 - £45000 per annum: Ashdown Group: An established professional services...

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

Business Development Manager / Media Sales Exec

£28 - 32k + Uncapped Commission: Guru Careers: A Business Development Manager ...

C# .NET Developer (PHP, Ruby, Open Source, Blogs)

£40000 - £70000 per annum + Bonus+Benefits+Package: Harrington Starr: C# .NET ...

Day In a Page

Alexander Fury: The designer names to look for at fashion week this season

The big names to look for this fashion week

This week, designers begin to show their spring 2015 collections in New York
Will Self: 'I like Orwell's writing as much as the next talented mediocrity'

'I like Orwell's writing as much as the next talented mediocrity'

Will Self takes aim at Orwell's rules for writing plain English
Meet Afghanistan's middle-class paint-ballers

Meet Afghanistan's middle-class paint-ballers

Toy guns proving a popular diversion in a country flooded with the real thing
Al Pacino wows Venice

Al Pacino wows Venice

Ham among the brilliance as actor premieres two films at festival
Neil Lawson Baker interview: ‘I’ve gained so much from art. It’s only right to give something back’.

Neil Lawson Baker interview

‘I’ve gained so much from art. It’s only right to give something back’.
The other Mugabe who is lining up for the Zimbabwean presidency

The other Mugabe who is lining up for the Zimbabwean presidency

Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

The model for a gadget launch

Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
Alice Roberts: She's done pretty well, for a boffin without a beard

She's done pretty well, for a boffin without a beard

Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
Get well soon, Joan Rivers - an inspiration, whether she likes it or not

Get well soon, Joan Rivers

She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

A fresh take on an old foe

Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
Fashion walks away from the celebrity runway show

Fashion walks away from the celebrity runway show

As the collections start, fashion editor Alexander Fury finds video and the internet are proving more attractive
Meet the stars of TV's Wolf Hall... and it's not the cast of the Tudor trilogy

Meet the stars of TV's Wolf Hall...

... and it's not the cast of the Tudor trilogy
Weekend at the Asylum: Europe's biggest steampunk convention heads to Lincoln

Europe's biggest steampunk convention

Jake Wallis Simons discovers how Victorian ray guns and the martial art of biscuit dunking are precisely what the 21st century needs
Don't swallow the tripe – a user's guide to weasel words

Don't swallow the tripe – a user's guide to weasel words

Lying is dangerous and unnecessary. A new book explains the strategies needed to avoid it. John Rentoul on the art of 'uncommunication'
Daddy, who was Richard Attenborough? Was the beloved thespian the last of the cross-generation stars?

Daddy, who was Richard Attenborough?

The atomisation of culture means that few of those we regard as stars are universally loved any more, says DJ Taylor